China draws "red lines" ahead of trade negotiations with the EU and the US - Reuters
Kyiv • UNN
China defends its economic model, which prioritizes industry over consumption. Beijing shows confidence on the eve of trade negotiations with Europe and the US.
China vigorously defends its economic policy, which prioritizes developed industries over consumption, taking a stance that analysts see as a demonstration of growing confidence ahead of future trade negotiations with Europe and the United States, UNN writes, citing Reuters.
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Chinese President Xi Jinping and his American counterpart Donald Trump plan more personal meetings this year, while Brussels has set a deadline for resolving disputes in Beijing in October, amid growing concerns over China's trade surplus exceeding one trillion dollars.
Western countries view China's policy as mercantilist and contrary to global trade rules, stating that prioritizing producers over households pushes cheaper goods onto world markets, weakening industry in countries seeking more balanced growth.
However, a meeting of senior Communist Party leaders on Thursday signaled policy continuity, calling for targeted support rather than consumer-oriented stimulus and structural changes long urged by China's trading partners and many economists.
A few days earlier, China's Ministry of Commerce accused the West of protectionism in a position paper on "so-called overcapacity," dismissing the idea as rooted in "logical flaws" and "hidden motives."
Qiushi, the leading theoretical journal of the ruling Communist Party, also defended China's low consumption levels in July, calling it a "historically justified" outcome of an investment- and catch-up-based development model.
Such statements do not give the West a direct answer to the question that China will not change course, said Xu Tianchen, senior economist at the Economist Intelligence Unit, but send two demonstrative signals.
"The first is a hope that others understand where this comes from. Better mutual understanding helps in negotiations. The second is about drawing a red line," Xu said.
In the Chinese Ministry of Commerce document, "it is clearly stated that China does not accept discriminatory measures against its firms and products," he added.
China argues that its model reflects the needs of a country still in the stage of converging with developed economies. Its products are not only cheaper but also becoming better, and investments in technology and science can benefit the entire world.
This month, Chinese Premier Li Qiang dismissed warnings of a "China shock 2.0" or a scenario where Chinese firms displace Western competitors in high-tech manufacturing, presenting it as a "China opportunity 2.0" for the global economy.
"This narrative does not resonate in countries receiving this export," said Eswar Prasad, professor of trade policy at Cornell University and former China director at the International Monetary Fund.
"China's heavy reliance on exports to sustain its own growth in light of weak domestic demand will make it difficult to argue that Chinese exports are a gift to consumers worldwide," he pointed out.
Washington's attempt to increase pressure on China with tariffs of over 100% last year failed, as Beijing used its dominant position in the production of rare earth elements, key to a wide range of global industries, to regain strategic positions.
Now the European Union, whose trade deficit with China averaged $1 billion per day last year, is conducting its own industrial and domestic procurement policies to protect its market.
This month, German Chancellor Friedrich Merz criticized Beijing for supporting an undervalued exchange rate of its currency.
However, China's recent statements indicate Beijing's growing confidence that it can ease trade disputes without significant concessions.
"The episode with US tariffs seems to have provided a model of managed interaction that Beijing is also applying to Europe - essentially buying time," said Alicia García-Herrero, chief economist for the Asia-Pacific region at Natixis.
"Beijing's positions on its economic model appear more confident and clearly articulated than a year or two ago," she added.